Perceptions of informal traders towards taxation in Buffalo City Municipality

Abstract

The pressure on South Africa’s tax revenue (income tax in particular) has become evident in recent years. The Davis Tax Committee and National Treasury have echoed the urgency of broadening the tax base by minimizing revenue leakages and maximizing compliance to tax legislation. Compared to industrialized and developing countries, the informal sector in South Africa remains an unexplored source of tax revenue. This research investigates the tax perceptions of informal traders to understand their attitude towards tax compliance. Personal, semi-structured and in-depth interviews were conducted with ten informal traders in Buffalo City Municipality in the Eastern Cape Province. The respondents generally displayed a positive willingness to comply with tax; issues of fairness and legitimacy as they pertain to the government, tax authority and tax system were strong anchors of tax compliance. A slightly defiant attitude towards the elements of the tax system was observed. Therefore, an inclusive approach to remedy non-compliance is recommended to address such variations in compliance behaviour.